New Construction 221(d)(4)
Construction or Substantial Rehabilitation of Multifamily Properties
| Eligible Properties | Market rate, low-to-moderate income and subsidized family properties. Independent living facilities may qualify as long as all services are optional and fees from services and meals are not included in underwritten rents. |
|---|---|
| Commercial Space Limitation | Limited to 10% of gross floor area and 15% of gross income |
| Use of Proceeds | New construction or Substantial rehabilitation which is defined as: a) Cost of improvements more than higher of: i) 15% of post-rehabilitated appraised value, or ii) $6,500 per unit adjusted for local high cost factor, or b) Replacement of two or more major building components |
| Davis Bacon Wages | Payment of prevailing wages is required by HUD; wages are determined by the Department of Labor. |
| Borrower | Single asset, special purpose entity, either for profit or non-profit |
| Loan Amount | No maximum (limited by loan parameters) |
| Recourse | Non-recourse |
| Interest Rate | Fixed for term of loan, determined by market conditions at time of rate lock (rate lock deposit is 1% and refunded at closing) |
| Loan Parameters | Maximum loan amount will be the lesser of: a) A percentage of replacement cost, including as is value of land for new construction and as is value of property for substantial rehabilitation, as follows: (i) 83.33% for market rate transactions; (ii) 87% for affordable transactions; and (iii) 90% for projects with 90% or greater rental assistance. b) FHA mortgage statutory per unit limits adjusted for local high cost factor, or c) An amount that achieves a minimum debt service coverage, as follows: (i) 1.20 DSC for market rate properties; (ii) 1.15 DCS for affordable transactions; and (iii) 1.11 DSC for projects with 90% or greater rental assistance. * Cost of offsite improvements, FF&E, marketing, construction contingency and operating deficit reserve excluded from loan amount. |
| Term and Amortization | Actual construction period plus 40 years (fully amortizing with interest only payable during construction period). |
| Prepayment and Assumption | Negotiable with best pricing for 10 years of call protection (can be a combination of lockout and/or penalty); loan is fully assumable subject to HUD approval. |
| Escrows | a) Replacement reserves required in accordance with HUD guidelines b) Taxes and insurance escrowed monthly (post construction) c) Working Capital Reserve equal to 4% of loan amount (post in cash or LOC) d) Operating Deficit Reserve equal to 3% of loan amount, or greater as determined by HUD at commitment (post in cash or LOC) |
| Mortgage Insurance Premium | Payable at Closing in an amount equal to 0.45% of the loan amount for each year of construction |
| Fees and Expenses | a) HUD application fee of 15 basis points due with submission of pre-application and 15 basis points due with submission of firm application; b) FHA Mortgage Insurance premium due at closing c) Lender Financing and Placement fee up to 3.5% payable at closing; and d) Actual cost of Third Party Reports. |
| Third Party Reports | Appraisal, Market Study, Phase I Construction Cost Review, and Plans and Specs Review are required |
| Timeline | 8-12 months depending on whether Borrower wants to submit a pre-Application |
Finance Reports
First Madderra & Cazalot report scheduled for release in early 2011. Please check back.
Multi-Family Reports
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